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From: marcos@sdchema.UUCP (David A. Pearlman)
Newsgroups: net.invest
Subject: Re: Investment Coins
Message-ID: <529@sdchema.sdchema.UUCP>
Date: Tue, 7-Jan-86 23:02:27 EST
Article-I.D.: sdchema.529
Posted: Tue Jan  7 23:02:27 1986
Date-Received: Thu, 9-Jan-86 06:14:38 EST
References: <23300005@uiucuxc> <2372@gatech.CSNET>
Distribution: net
Organization: Biosym Technologies, Inc.
Lines: 116
Keywords: coin brokers, coin newsletters, investments



Well, O.K. I've waited long enough; time to put my two cents in on this
issue (no pun intended).

I started collecting coins as a kid, in the late '60's. At this time
coins still hadn't caught on as a major league INVESTMENT; rather, they
were by and large a hobby for those who were interested, albeit a lucrative
one for those with experience and foresight. It wasn't until the early-to-mid
'70's that coins were perceived by the *general public* as a way to make money.
Unfortunately, associated with coins are numerous intangibles/fine points
which may present serious pitfalls to the casual investor: While stock
or gold has a concrete value based on the open market, the value of coin
depends greatly upon (among other things) condition. And no matter what
anyone tells you, there is no fail-proof, completely objective way of
grading coins (except, perhaps, proof issues...).

It wasn't always this way. Until the INVESTORS came into the coin market,
(i.e. the mid-70's), coins were generally assigned one of several broad
grades: about-good, good, very good, fine, etc. While there might still
be some ambiguity at the boarders of these classifications (as well as
for issues such as a scarcly circulated coin on a highly pitted planchet;
but that's another issue), acceptable grading wasn't too hard (and was
made even easier by photo-guides such as Photograde). When the investors
came, grading gradually moved over to the now-used number system, with
its emphasis on minor differences. It could be argued that the emphasis
on minor differences is only really acknowledged at the high end. But
high grade coins are in fact the group most often sold for investment purposes.

At any rate, it has now gotten to the point that you may pay 2 or 3 times
the normal price for a particular specimen because it is ms63 grade instead
of ms60. Can anyone tell the difference? Yes, a trained eye can. But
unless you're truly a numismatist, you probably won't be able to. Which
means that if you're Joe-investor, and the dealer from which you buy
your coins from isn't both good *and* honest, you may find yourself
with a bum steer. Very costly...and as I noted, many, if not most coins
hawked as "investments" by the coin brokerages are in these superior
grades (or at least are supposed to be).


Another problem is that of "sliders" or coins which could have been uncirculated
(ms60) maybe, once, perhaps, if you close your left eye and squint real hard
:-). Good, reputable dealers will sell these coins as such, and they command
prices significantly lower than ms60 specimens. Other dealers will
sell them to the unsuspecting investor as ms60, maybe as a below-market
"good deal". A rude awakening awaits anyone who tries to sell these babies.
Unfortunately, a large number of dealers can be found who sell these
types of coins as uncirculated. There are variations on this theme, too,
such as the technique of "whizzing", whereby slightly circulated copper
coins (especially large cents) are made to look brilliantly uncirculated--
to the untrained investor. There are others, many of which I observed
when I worked in a coin store as a kid.

Yet another pitfall for the investor in coins is the fact that there is
no national market system for coins, since they are not an objectively
definable commodity. What this means is that the value of a particular
coin is really what someone will give you for it. In this way coins
can be thought of in the same way as art. Now, there are price guides,
the most familiar being the Redbook. But these are only guides (and
Redbook tends to list inflated values; I'd steer clear of anyone
who boasts they're giving you a 'deal' by selling coins below Redbook).
When I was more active, they published a listing called the "grey sheet",
which was primarily circulated among coin shops. I'm not sure if it's
published anymore, but it was about the best place to get coin prices--
they were current (it was published weekly) and fairly reliable
(both wholesale and retail were listed). However, its listing were
not complete. Frequently published price lists in coin journals
(Coin World, etc.) tend to be a little better than Redbook (because
they're more current), but still tend to be inflated, especially
if you're interested in the price you'll get from a dealer if you
want to *sell*. Probably the best way to determine coin prices is
to look at ads from dealers you know are reputable (*beware of
lowball prices; the coins are almost always overgraded--this is not
usually a problem with reputable dealers, but...*). The prices
won't be up to the minute (since there are no daily journals carrying
significant numbers of coin ads), but most prices don't change much
from day to day anyway (except, perhaps, bullion coins, which change
with prices of silver/gold, etc.). Of course, if you have very rare
coins (test patterns, super-keys, etc.) you may never see them advertised
at all. I guess then you'll just have to go to a legitamate appraiser
(if you can find one).

As for the question someone raised about being able to sell coins
for what you paid for them very soon after purchase: if you bought
them from a brokerage house, forget it. They sell them to you
at a profit, not with a commission. If you try to sell them back,
you've got to expect that you'll get less. Of course, it's entirely
likeley that they'll go up in time (if you bought them from
a reputable source). But the keyword is time. You *can* make "overnight"
money, but you won't as a casual investor; you've really got to know
your coins. Considering my investments, I made a good amount of money
when I worked in the coin store ("Leo's Coin Shop", Phoenix, AZ--if
any of you netters remember it). But I knew coins. Particularly
good was the weekly "bid-board" we had. Sometimes perfectly good
coins were overlooked, and could be had for a song. I remember
an extremely fine copy of a 1919 liberty half dollar that I bought
for about $1.25. It's worth more than 100X that now (and is happily
sitting in a safe deposit box somewhere...). If you know your stuff,
bid-boards and coins shows can be great places to make some quick
money. But if you're just an investor...forget it.

The bottom line? I guess I'd say that I think coins *are* a good investment.
But either take the time to really learn about them before investing,
or deal with someone who you trust implicitly. I'd be wary of
"Joe's Smorgasboard and Rare Coins Ltd. Inc of Indiana," even if
they claim that all their investors have quadrupled their money in the
last week :-). And remember: fancy literature filled with persuasive
arguments is cheap (as are "800" lines).

Hope this answers at least a few of your questions.

					   David ("Dr. DAP") Pearlman


"And all this science I don't understand...
 It's just my job five days a week" -- Elton John